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FOR IMMEDIATE RELEASE

Contact:    Anderson L. Smith
            President and Chief Executive Officer
            (423) 586-8421

                      JEFFERSON BANCSHARES, INC. ANNOUNCES
                      SUSPENSION OF QUARTERLY CASH DIVIDEND

      Morristown, Tennessee -- February 2, 2010 -- Jefferson Bancshares, Inc.
(NASDAQ: "JFBI") (the "Company"), the parent company of Jefferson Federal Bank
(the "Bank"), announced today that the Company's Board of Directors has voted to
suspend the payment of the quarterly cash dividend on the Company's common stock
in an effort to conserve capital. President and Chief Executive Officer Anderson
L. Smith stated, "While the Company and the Bank remain well-capitalized under
all applicable regulatory requirements, the Company's Board of Directors has
determined that the suspension of the Company's dividend at this point in time
is prudent to preserve capital in light of these uncertain economic times." Mr.
Smith further stated that the Company's Board of Directors intends to reevaluate
the payment of a quarterly dividend on a quarter-by-quarter basis in the future.

      Jefferson Bancshares, Inc. is the holding company for Jefferson Federal
Bank, a Tennessee-chartered savings bank headquartered in Morristown, Tennessee.
Jefferson Federal Bank is a community-oriented financial institution offering
traditional financial services with offices in Hamblen, Knox, Sullivan and
Washington Counties, Tennessee. The Company's stock is listed on the NASDAQ
Global Market under the symbol "JFBI." More information about the Company and
Jefferson Federal Bank can be found online at www.jeffersonfederal.com.
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      Statements contained in this news release which are not historical facts,
are forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risk and uncertainties which could cause actual results to differ materially
from those currently anticipated due to a number of factors, which include, but
are not limited to, factors discussed in documents filed by the Company with the
Securities and Exchange Commission from time to time.

      The Company does not undertake, and specifically disclaims any obligation,
to publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.